RE: S7-07-04

I wish to comment on the above Concept Release. I have been a non-professional retail options trader for 20 years. I have no vested interest in this matter beyond my personal trading. I would like to thank the Commission for raising the important issues in the Concept Release for public comment and their concise overview and history. I will make some general comments to address this.

This conventional role of exchange markets has been to provide a trading venue for a crowd of participants. The fact that the various exchanges have been established as independent profit centers has led them to attempt to gain a competitive advantage. This competition has been beneficial to the option consumer. However, this competition has raised some serious issues as suggested in the Concept Release which are detrimental to the Best Bid Offer System (NBBO or BBO).

Solutions to competitive exchange issues have been sought through the NBBO system. Many of the concerns expressed in the Concept Release are to this end. Penny increments and rounding-off of NBBO quotes and trades are proposed. Some would suggest penny increments to the detriment of quote stability and the important role of specialists and market-makers. "Mini-auctions" to improve on and exploit NBBO quotes have evolved. All of theses concepts attempt to skew the supply and demand to one interest or another in a exchange market that is very competitive at the expense of useful option quotes.

Being a retail trader, the NBBO system is essential. There are good reasons why the NBBO is what it is. Providing "liquidity points" in nickel / dime increments allows for reasonably stable quotes and has real value. Price improvement beyond nickel increments is not significant in my opinion. It is comforting to know when making a trade, as an "uninformed non-professional" trader, that the NBBO quotes and trades shown are reasonably stable, precise, and for everyone- informed or not. I believe the Commission should consider this to the greatest degree.

Payment for order flow is beyond me but should it go forward, should be disclosed to some extent. Allowing both sides of the trade to evaluate the cost / benefit of this middleman activity allows them to shop accordingly. This may increase competition for this activity. Reducing these transaction costs should increase liquidity. Disclosure will allow market makers to expect a predetermined order flow allocation which enhances their ability to provide a fair price. (Also consider that payment for order flow arrangements should not be real time and should be disclosed to some extent to prevent manipulation of public order flow to influence markets.)

Regardless of the commission's actions on payment for order flow arrangements and other concerns, I would encourage the SEC to reach international standards of conduct and / or restrictions to maintain the integrity of the NBBO system for the long term, and resist attempts to compromise it due to competition issues.